Posted
by
Soulskill
on Sunday May 27, 2012 @01:13PM
from the best-defense-is-a-good-offense dept.

An anonymous reader writes "CNN takes a look at Apple's response to the Department of Justice's investigation into eBook price fixing. The filing 'cuts the government's case to shreds' while at the same time not bothering to defend the five publishers also under investigation. Apple said, 'The Government starts from the false premise (PDF) that an eBooks "market" was characterized by "robust price competition" prior to Apple's entry. This ignores a simple and incontrovertible fact: before 2010, there was no real competition, there was only Amazon. At the time Apple entered the market, Amazon sold nearly nine out of every ten eBooks, and its power over price and product selection was nearly absolute.'"

That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

Except that if you actually read the words, they claim the exact opposite. I have no data to offer about their claims, but you haven't offered any either. In fact, you seem to be offering what the DOJ offered, anecdotes involving the prices of a tiny number of books, with no analysis at all of the overall market.

And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

Though the result is that consumers got screwed because of it, this is my understanding of it as well.

What I remember is that Amazon basically had the publishers by the balls, dictating somewhat more reasonable prices for ebooks. When Apple came to the market, they specifically worked with the publishers saying "hey, we'll let YOU set the price, so long as you always offer us the best one". The end result is that prices skyrocketed overnight, and today are still far higher than they once were.

I mean, other than the fact that you personally are paying more, higher prices are not actually in and of themselves a bad thing.

The prices were artificially depressed before. YOU were paying less, but that also means someone on the other end was necessarily earning less. That might seem great to you, but I'm sure the writer wasn't super hyped about it. Neither was the publisher.

You don't have a RIGHT to low prices, though you have a right to only pay what you think is fair. If the prices are too high, stop buying. If everyone thinks the prices are too high, they'll stop buying too. If these 'new' higher prices are what the market will bear, then THAT'S the price that we should have been paying all along.

Don't be fooled into thinking your personal desire to pay as little as possible is actually the fair or correct price to pay. It's just one of a nearly infinite number of options.

The prices were artificially depressed before. YOU were paying less, but that also means someone on the other end was necessarily earning less. That might seem great to you, but I'm sure the writer wasn't super hyped about it. Neither was the publisher.

Here is my issue:
A Mass market paper back is $7.99. With a Barnes and Noble discount I can get 10% off the book.
Along come ereaders. No paper to waste, no gas to drive the book to the store. No cost to pay someone to stock it, or print it
But the price is $7.99 FIRM.
So what do I do? Pay $7.19 or $7.99? Why should I pay the higher price? NOTE that both of these prices are set by the publisher (except for the 10% discount, which is eaten by B&N, not the publisher) I am guessing the publisher wants me

What competition were they trying to quash? Their only competition between 2007 and 2009 was Sony. Sony wasn't exactly marketing their ebook reader. I didn't realize they even made one until B&N started selling the Nook. That is when Borders started putting Sony readers on display in response to B&N. In a loss leading strategy they their profits would go down in the short term. But that never happened. Amazon reported making a lot of profit on the Kindle and ebooks. Basically Apple is just sour that

Far from it. If anything, Amazon sold e-books so cheap to drive more Kindle sales. And loss leading to crush competition is very much illegal (and obvious to boot), so I'd find it a little unlikely that Amazon would risk it. The reason they were cheap before is because it was a wholesale model - Amazon and the publisher negotiated a price, Amazon paid for it, and could then set the price at whatever they wanted. They could have 100% markup, 50% markup, 10% markup, or 0% markup - whatever. They could li

I don't intend to waste my time pulling up research to prove what is already obvious to me. I've been buying ebooks for years. Before the agency model, books were cheap. After it, they were not. Every single book on my 100+ book wishlist on Amazon that has the prices set by the publisher (agency model) is $10+; every single book on my 100+ book wishlist on Amazon that has the prices set by Amazon (pre-agency model) is $7 or less. These are all full length books, and most either literary classics or science

That's a lot of words that don't change the fact that virtually every eBook you could ever want to buy costs more now than it did before Apple entered the market, which is the actual problem that the DOJ case intended to address.

Except that if you actually read the words, they claim the exact opposite. I have no data to offer about their claims, but you haven't offered any either. In fact, you seem to be offering what the DOJ offered, anecdotes involving the prices of a tiny number of books, with no analysis at all of the overall market.

And remember, Apple exerts almost zero (the exception being the so-called "most favored nation" clause) control over book prices.

The details of the MFN would be interesting... if it is "you can't sell it cheaper to anyone than to us", it can be defended. That's the publisher's problem if they want to agree to such clauses. However, if they let Apple set the resulting pricing - "noone can sell it cheaper than in the iBook store" - that would be problem; it should certainly be possible for other retailers to demand less than Apple's 30% cut.

But MFN is not exclusive. You can sign a MFN clause with Apple and Amazon. Then Barnes and Noble can negotiate a lower retail price just fine. At this point the publisher has to go back to Apple and Amazon and give them the Barnes and Nobel price going forward. This doesn't guarantee Apple the lowest price, it guarantee's Apple doesn't get screwed by having to sell the same product at a higher price.

They are not trying the case in the public. When it come time for the trial Amazon will hand over its records and they will clearly show what occurred. They can also go and get B&N and Sony's sales records. Apple is the least likely company to have data on ebook sales prior to the switch to the Agency model. They didn't enter the market till 2010 and they were never a big player in the market afterwords.

They are not trying the case in the public. When it come time for the trial Amazon will hand over its records and they will clearly show what occurred. They can also go and get B&N and Sony's sales records. Apple is the least likely company to have data on ebook sales prior to the switch to the Agency model. They didn't enter the market till 2010 and they were never a big player in the market afterwords.

I'm sure Apple did their due diligence before jumping into the marketplace. If they were never a big player in the market afterwards how is it they are charged with fixing prices?

You argument doesn't stand up to history. The switch to the Agency model occurred. It occurred like Steve Jobs promised it would on camera. All the publishers except one changed their pricing with the launch of the IPad. Prices on best sellers went up. The Department of Justice has witnesses and emails showing Apple organized this. The contracts the publishers signed with Apple clearly made it impossible for Amazon to lower prices. Saying Amazon had large market-share isn't a defense for price fixing.

Unfortunately I think the argument that Apple itself isn't responsible will probably be considered true in the end. The book publishers on the other hand can, and should, still get nailed to the wall. Charging as much for an ebook as a physical book is completely off-base. You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount. As it is, much of the time you can buy a print edition cheaper than an eBook version on new releases...

Apple certainly deserves some of the blame, but I just can't see the DOJ managing to make it stick against them in this case.

Book publishers can't afford to get nailed to the wall. A few more pushes and we lose the industry. They are shrinking rapidly and having a tough time staying afloat

Is this actually surprising? This is sort of how it works. Publishers fail to adapt to a new market, they fall under the bus and get pulled apart. Adapt or die.

This doesn't mean there won't be publishers in the future. It means there will be new publishers who understand the new market.

That being said, I haven't seen a lot of proof of publishers having any trouble, beyond a lot of them saying "We need more money! Give us your money!". Even the smaller publishers have been hanging around just fine a

This doesn't mean there won't be publishers in the future. It means there will be new publishers who understand the new market.

Or it might mean that won't be publishers in large numbers in the future. Sometimes there isn't some great adaption the market just closes up and gets much smaller. We've seen this already with newspapers (http://www.viralblog.com/wp-content/uploads/2012/02/newspaper-1024x705.jpg) over the last 45 years, we've been seeing it with books. We could very easily be returning to a w

There has grown up in the minds of certain groups in this country the notion that because a man or corporation has made a profit out of the public for a number of years, the government and the courts are charged with the duty of guaranteeing such profit in the future, even in the face of changing circumstances and contrary to public interest. This strange doctrine is not supported by statute or common law. Neither individuals nor corporations have any right to come into court and ask that the clock of history be stopped, or turned back.

It's not the government's job to make sure that prices stay low, either. They're just around to make sure the playing field is level. Before Apple came along in the book business, there's reason to believe that the playing field WASN'T level, and that Amazon was using their clout to get themselves a better deal at the expense of writers and publishers.

The price is what everyone is focussed on, but that's just a number. It doesn't necessarily accurately r

And yet, Baen Publishing has proven for more than a decade that they can sell MORE ebooks and MORE dead tree books if they keep ebook prices cheap and don't use DRM. Smashwords is letting authors set their own prices and seeing the average price for an e-book drop to around $3.00 the last time I checked. O'Reilly has been selling a librar subscription model for e-books online through their Safari Books Online outlet for at least as long as Baen has been working their model. Lulu has moved into editorial services for e-books as well as print on demand.

The fact is that the Big Six still haven't figured out how to sell ebooks successfully while the smaller, more nimble players are eating their lunch. Here's a couple of clues, fellas. Drop DRM and drop your prices. You'll make MORE money.:-)

What exactly does a publisher do when a book is sold in electronic format? If what they do is still valuable, then someone will pay them for doing that. If not, what's the point of publishers?

Just guessing here, but editors, proof readers, marketing, etc. And let's not forget that some authors get advances. Publishers don't supply all the same services for electronic books as they do for printed books, but a book isn't finished just because the author is done writing it.

You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount.

How much do you think it costs to print a book? Let's look at it this way. You can go out and buy a laser printer that will do 5c/page for double sided text. Each double sided paper equals four pages in a hard cover book. 400 pages in a typical book, or printing costs of about $5. Done at home on consumer equipment. Yes, you still need binding and shipping and such but I have to figure that a professional print house can do the actual printing for cheaper than I can do it at my computer desk so it would all

Forget about comparing the price of hard cover books to ebooks, try comparing the cost of paperback books to ebooks. In almost EVERY case the ebook will cost more than the paperback book, that is just absurd.

Why do hardbacks cost more than paperback? The extra cost of the "cover" is probably less than a dollar, yet you've had no problem paying it before and never complained. Why? Maybe because the hardcover book will last LONGER than the paperback and is easier to take care of. Just like the ebook. You are paying more for a better product. Production costs are largely irrelevant.

The question is, are they charging more than a fair price? I think the answer to that is they are not. So what is the problem?

It remains to be proven that eBooks will last longer.If your eReader breaks and the seller has gone out of business or just decided to not let you download the books anymore, you loose the books completely.

Fine. You can wait a year or so and pay less to read copies of those books that make it to paperback. Some of us will buy the books that interest us as they come out for somewhat more. Books that enough of us early readers like will eventually filer down to you. Everybody wins.

When a book is available in paperback, why should I be expected to pay hardcover prices for the ebook. That's what I was referring to and if the paperback actually IS available then you SHOULD make the comparison between the two.

So the total cost savings for a publisher by going digital is likely more than $5 but certainly less than $10. And most digital copies tend to be about $5-$10 cheaper than the hardcover. Yes, there are exceptions but on the whole I'd say it tracks pretty well.

Yeah sure, the 30% cut being exactly the same as Apple wants on everything else sold through them is a complete coincidence... the fact that items sold through other venues can't be offered cheaper exactly like their policy for apps in their appstore with in app purchasing... all a complete coincidence.

Charging as much for an ebook as a physical book is completely off-base. You still have to make the money back on editors, artwork, advertisement, etc., but the physical print, transportation, and storage costs should cause those books to be discounted a good amount.

On the other hand, a hardcopy book is an asset on which the publishers and booksellers can be charged an inventory tax. Thus it is often to their financial advantage to actually destroy them rather than hold them in the hope of future sales. H

>>>not being allowed to sell books cheaper through other sources..... Apple is trying to force retail outlets like Target from carrying the Kindle. Seems pretty anti competitive to me.>>>I other words they are guilty of price-fixing what other stores may sell the ebooks for, PLUS anticompetitive behaviors such as blocking amazon from target. Guilty guilty guilty. I'd like to see Apple gets slapped by the DOJ, even if it's just "Don't do that again," and a 5 year cease-and-desist order l

Isn't that the EXACT conditions of placement in the US Gov GSA catalog? Promise us best price or you don't get to play.

Apple gets the best price, but that doesn't preclude others from getting the same price as Apple. And if the publishers want to sell the books for a lower price than they are now then everyone can get the same low price.

Apple's hands are dirty from forcing publishers to give them the lowest price available, but they aren't telling publishers what that price should be.

The DOJ will demolish Apple's filing by saying, "That means 1 in 10 ebooks were not sold in Amazon, but on other magazine and book websites. So there was a healthy market of multiple e-stores competing with one another to lower the prices of this product, until Apple arrived on the scene and colluded with the publishers to engage in price-fixing" --- When the record companies tried this with CD sales, the case found Walmart was part of the collusion, and just as guilty of the crime. Same applies to Apple mart.

That's entirely possible, but in that case it's because Apple brought a higher end market with them. Revenue with monopoly pricing is maximized by setting prices in relation to what the market can bear. Copyright is not a free market and filing antitrust suits over pricing or price collusion is specious; there is no free market pricing, there is no competition and that is by design.

If the DOJ was at all interested in competition they'd work to abolish copyright and let the Pirate Bay put some competetive pr

Copyright is not a free market and filing antitrust suits over pricing or price collusion is specious

This misunderstanding is at the heart of the matter. Copyrights grant a monopoly (and therefore the right to engage in monopoly pricing) to the copyright holder for that specific work. The fact that a work is copyrighted does not grant monopoly rights to everyone else in the production chain, nor does it allow monopoly pricing for all books. I.e. you can say "this work which I own, I only make available to bookstores and re-sellers for $20". But the publishers cannot collude together and say "All books that *we* collectively own are only available for $20", nor can the bookstores and re-sellers collude to charge a fixed premium over what they pay publishers. The bookstore does not hold any copyrights, and no individual publisher holds all copyrights. So a general increase in the price of *all* books without any corresponding increase in marginal costs, prices paid to authors, or input prices is pretty good evidence of illegal collusion, irrespective of whether any individual book is copyrighted.

So what you have here are two illegal practices:

* publishers colluding with each other to charge high prices. They should be competing with each other, setting only the prices for the works that they (individually) hold copyrights over. Then if they charge too much for sci-fi author A, you can go to publisher B who holds sci-fi author B's copyrights. If B is substitutable for A, and B will be, to some extent, then a low enough price will force the publisher of A to also lower their price. When they all get together, they can set prices for all books, and this is illegal.

* Collusion on the part of the re-sellers (e.g. apple, Amazon), who hold no copyrights. Whenever anyone says, "I will charge a fixed markup", they run the risk of being undercut by someone else who is willing to take a smaller margin. Unless the first person colludes with the (monopoly) supplier, so that whenever the competing re-seller tries to lower their markup, the supplier jacks up the price to the re-seller or refuses to supply the re-seller until the re-seller gets the message that he must charge the same fixed markup. Incidentally, this is why there were multiple lawsuits over "MSRP" -- suppliers aren't supposed to have the power to set retail prices, and retail stores need to have the right to try to undercut each other by lowering prices to the end user. But when the original good has a sole supplier, there is always the possibility of producer forcing retailers to sell for a certain price by withholding supply or charging more to those retailers that offer discounts.

Whether or not the DoJ can *prove* collusion is one thing, but looking at the behavior or prices its pretty clear that illegal collusion is occurring, this despite the fact that that books are copyrighted.

The books were cheap because Amazon was selling them at a loss to prevent the entry of competition. Amazon has a long-term strategy to work on razor-thin margins driving out all competition. In the last quarter they made about 1% of gross- they made a penny out of every dollar people spent. No small or medium business in their right mind would enter a market like that. So overall Amazon does not turn a lot of profit, but their stock is valuable (much more than their profit would justify) because investors expect that once they have completed driving all their competitors out of business they will raise their margin (meaning the prices you pay go up). So you are going to pay more, a little bit now because of the agency model and most favored nation status thanks to Apple, or a lot more later when no one but Amazon has physical or electronic books to sell you.

>>>mazon was going to sell at a loss for only as long as it took to drive other sellers out of the market. Then things would get much worse.

So you wan to file a lawsuit against Amaozn on theBELIEF iof some future event? You have some Precrime telpaths stashed-away somewhere? You cannot punish a company for thigns they have not done yet, you stupid fuck.

We need some independent publishing houses, and we need them fast. The content distribution should not be that difficult, as long as these indie publishers are able to publish DRM-free books in multiple formats. Make your books available in all the major formats (kindle/epub), and you will kill Amazon, Apple, Google, and anyone else. The question is, what will those companies do to stop you?

Independent from what? Even the biggest publishers have a fairly flat structure and if there is ANY media industry known for it's small time producers it's the publishing industry. If they can convince someone that there is readership (or are willing to put up their won money) anyone has been able to get anything published since as long as the printing press has existed. There are no gatekeepers in publishing and never have been.

And the publishers running their own stores is a bad idea in the same way that

A small publisher doesn't need a best seller, but then do need 10-20 books a year that sell 50k copies with reasonable margin.

Anecdotally, the only fiction I have read in the last 5-7 years is the Stei Larsson trilogy. This despite getting the amazon library off TPB. It is just too much work to find books: the publishers have failed at marketing. Amazon had a good system going to recommend books, but that was really only effective with proper bookworms, as best I can tell.

From Page 6, Bullet #7 (emphasis mine)
"This lawsuit wrongly seeks to condemn Apple based on the Government’s apparent dissatisfaction with the impact of competitive entry, demand stimula- tion and innovation (ignoring significant indicia of consumer and market benefit), not based on any anticompetitive conduct by Apple. This is contrary to law and sound economic policy." "This is contrary to law and sound economic policy" means ( "This is contrary to law" ) AND ( "This is sound economic policy"

When something can be interpreted in two different ways, with each of those interpretations implying a diametrically opposite meaning, it's reasonably characterized as "wrong". Clarity and unambiguity are two ways to be "right" - there should be no dispute as to these. If there are many ways to attain clarity and precision, then they may all very well be "right", but they aren't all equal. Some would be clearer and more precise than others, and it would suit us well to choose those.

2006 Amazon was the king of books sold online. If you purchased a book and had it delivered to you house via Fedex chance are you purchased your book from Amazon or its chief competitor Barnes and Noble. Amazon was the Walmart or the Tower records of books.Sept 2006 Sony releases the PRS-500 e-ink ereader.Nov 2007 Amazon releases the Kindle and begins marketing it on Amazon.com to its large book buying customer base.Nov 2009 Barnes and Noble, Amazons primary competitor, releases the Nook two years after the Kindle. It receives good reviews. B&N starts marketing the device in B&N stores to its millions of customers.Mar 2009 Amazon releases the Kindle app for IPhone (app would later work on IPad)April 2010 Apple releases the IPad with IBooks three years after the release of the Kindle and 1 year after the release of the Kindle app. The Agency model replaces the wholesale model.July 2010 Borders starts selling the Kobo ereader three years after the release of the KindleOct 2011 Borders goes into bankruptcy. Kobo survives and still sells books under the Agency model.
So saying there was no competition is strictly true. With the exception of Sony, Amazon did not have any competition for 2 to 3 years. So of course it gained 90% market share. And of course that market share went down after B&N started selling the Nook. If you look at current market share it is similar to Amazons share in 2006. Amazon in #1 and B&N is #2.

Project Gutenberg is great, and I'm sure many would say there are plenty of great 100yo books to keep you busy for a lifetime. But some of us like to read newer stuff too, and just sometimes, an ebook is nicer to deal with than a real book.

Whatever. Most decent writers seem to prefer to go the route through the publisher instead of self-publishing, for reasons which seem obvious when you've actually published something. A publisher does a fair bit more than just marketing and pressing Ctrl-P.

Would you like to cite any concrete sources that show the author does 90% and that the author gets less of the profit than the publisher? No doubt the author does the most important work, but surely the polish a proper publishing team can bring to bear on a book can elevate it above most of the 99c self-published crap on the Kindle Store.

No, they don't. A writer must sell a great many books to earn a good living; this can be done by writing books you do not like, but it cannot be done by a horrible writer. If you think you've read a published book by a horrible author, then you haven't seen the stuff they're rejecting.

Just because you may not like an author's books doesn't mean they are horrible. Even if they are horrible some may actually enjoy reading horrible books. Books are worth whatever people are willing to pay for them.

Exactly. Consider the entire romance genre. The vast majority of them are the literary equivalent of a Happy Meal and I know many women who buy a dozen a month and blow throw them as if someone may steal it from them.

Ever read anything by V.C. Andrews? An ex-girlfriend goaded me into reading one of her books and I didn't even finish due to how fucking sick it was, and I've been reading Stephen King and similar since I was in 3rd grade. She must have really enjoyed reading about rape and sexual abuse or something...

So what? No writer should earn a living because there are some bad ones? There are bad engineers too, should we stop paying all engineers? For that matter, there are bad teachers, and construction workers, and doctors, and every other profession you care to name. I guess we should just stop paying everyone.

while apple is filling many of the publisher's roles taking on some of it's costs and slightly more of its profits. If everything stayed the same then this would mean less money left over for author development via advances and promotion. Apple uses none of it's income for that.

But it may be the case the market for reading increases. That's not clear. The public can only read so much. But maybe they might consume (without reading) more if it is made easy. In which case they offset the profits they rem

You don't have to suspect that, it is already happening. The self publishing industry is thriving on books whose intent is under 500 copies sold. Books created exclusively as ebooks meant to sell thousands of copies are letting authors write for tiny niches. Higher academic and professional prices are feeding niches. While general interest books designed to sell tens of thousands but not millions of copies are dropping off fast.

There are alternatives. I bought several ebooks as a package from Baen.com that were written by an author named Roberta Gellis over almost 50 years ago. I had read some of them in my school library back in the 70's and was looking for them to reread a couple of years ago so I contacted the author at her website and she told me about Baen republishing them. For 6 dollars I got 4 or 5 ebooks in that series and enjoyed rereading the ones I had seen and discovering the ones I had never seen. This is the kin

If this was about television, movies or music, people would be on here preaching about how you should pirate what you want to see. So anonymous coward, next time an article such as those comes up, I ask you to come back and ask people to support sites with free music & video for download.

"Once a single e-book is created by the publisher. You can distribute it an unlimited number of times. So the publishers make nearly a 100% profit on electronic sales. "

Yes, costs are lower because of electronic distribution. But no accountant in his right mind would calculate the profit after the first copy in the manner you have. The costs of editing, proofing, legal, writing and marketing are always distributed over the total number of books sold when dete